-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, Hu71O2uoVFj4141nPiuWSJ8Lw7kpStyyIOZZ8hoIIOniAN91FJn1rf91hjglfV2j VRmfGMhybPrLcC3g46y2CA== 0000105770-94-000008.txt : 19940819 0000105770-94-000008.hdr.sgml : 19940819 ACCESSION NUMBER: 0000105770-94-000008 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19940630 FILED AS OF DATE: 19940812 FILER: COMPANY DATA: COMPANY CONFORMED NAME: WEST CO INC CENTRAL INDEX KEY: 0000105770 STANDARD INDUSTRIAL CLASSIFICATION: 3060 IRS NUMBER: 231210010 STATE OF INCORPORATION: PA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-08036 FILM NUMBER: 94543270 BUSINESS ADDRESS: STREET 1: 101 GORDON DR CITY: PHOENIXVILLE STATE: PA ZIP: 19460 BUSINESS PHONE: 2155942900 MAIL ADDRESS: STREET 1: 101 GORDON DRIVE STREET 2: PO BOX 645 CITY: LIONVILLE STATE: PA ZIP: 19341-0645 10-Q 1 2ND QUARTER 1994 10Q This report contains 12 pages (including cover page) SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For The Quarterly Period Ended June 30, 1994 -------------- Commission File Number 0-5884 ------- THE WEST COMPANY, INCORPORATED - - ------------------------------------------------------------------------------ (Exact name of registrant as specified in its charter) Pennsylvania 23-1210010 - - ----------------------------------------- ----------- (State or other jurisdiction (I.R.S. Employer Identification of incorporation or organization) Number) 101 Gordon Drive, PO Box 645, Lionville, PA 1934100645 - - ------------------------------------------- ----------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code 215-594-2900 ------------ N/A - - ------------------------------------------------------------------------------ Former name, former address and former fiscal year, if changed since last report. Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding twelve months, and (2) has been subject to such filing requirements for the past 90 days. Yes X . No . ---- ---- June 30, 1994 - - - 16,015,990 - - ----------------------------------------------------------------------------- Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Index Form 10-Q for the Quarter Ended June 30, 1994 Page ---- Part I - Financial Information Item 1. Financial Statements Consolidated Statements of Income for the Three and Six Months ended June 30, 1994 and July 4, 1993 3 Condensed Consolidated Balance Sheets as of June 30, 1994 and December 31, 1993 4 Condensed Consolidated Statements of Cash Flows for the Six Months ended June 30, 1994 and July 4, 1993 5 Notes to Interim Financial Statements 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 8 Part II - Other Information Item 1. Legal Proceedings 10 Item 4. Submission of Matters to a Vote of Security Holder 11 Item 6. Exhibits and Reports on Form 8-K 11 SIGNATURES 12 Item 1. Financial Statements The West Company, Incorporated and Subsidiaries CONSOLIDATED STATEMENTS OF INCOME (in thousands, except per share data)
Three Months Ended Six Months Ended June 30, 1994 July 4, 1993 June 30, 1994 July 4, 1993 ------------- ------------ ------------- ------------ Net sales $ 91,500 100 % $87,100 100 % $ 178,600 100 % $ 174,000 100 % Cost of goods sold 61,700 67 60,200 69 119,900 67 123,000 71 - - ------------------------------------------------------------------------------------------------------------------------------------ Gross profit 29,800 33 26,900 31 58,700 33 51,000 29 Selling, general and administrative expenses 16,900 18 15,800 18 32,400 18 30,700 18 Other expense (income), net 500 1 300 - 1,200 1 (700) (1) - - ------------------------------------------------------------------------------------------------------------------------------------ Operating profit 12,400 14 10,800 13 25,100 14 21,000 12 Interest expense 700 1 700 1 1,300 1 1,400 1 - - ------------------------------------------------------------------------------------------------------------------------------------ Income before income taxes and minority interests 11,700 13 10,100 12 23,800 13 19,600 11 Provision for income taxes 4,200 4 3,800 4 8,900 5 7,600 4 Minority interests 600 1 500 1 1,100 - 800 1 - - ------------------------------------------------------------------------------------------------------------------------------------ Income from consolidated operations 6,900 8 % 5,800 7 % 13,800 8 % 11,200 6 % Equity in net income of affiliated companies 600 400 700 600 - - ------------------------------------------------------------------------------------------------------------------------------------ Income before cumulative effect of change in accounting method 7,500 6,200 14,500 11,800 Cumulative effect to January 1, 1993 of the change in accounting for income taxes - - - 1,000 - - ------------------------------------------------------------------------------------------------------------------------------------ Net income $ 7,500 $ 6,200 $ 14,500 $ 12,800 - - ------------------------------------------------------------------------------------------------------------------------------------ Net income per share: Income before cumulative effect of change in accounting method $ .47 $ .39 $ .91 $ .75 Cumulative effect of change in accounting method - - - .06 - - ------------------------------------------------------------------------------------------------------------------------------------ $ .47 $ .39 $ .91 $ .81 - - ------------------------------------------------------------------------------------------------------------------------------------ Average shares outstanding 15,993 15,811 15,975 15,787 The Company adopted Statement of Financial Accounting Standards No. 109, Accounting for Income Taxes, in 1993. See accompanying notes to financial statements.
The West Company, Incorporated and Subsidiaries CONSOLIDATED BALANCE SHEETS (in thousands, except per share data)
ASSETS June 30, 1994 Dec. 31, 1993 Current assets: --------------- ------------ Cash, including equivalents $ 8,800 $ 5,200 Accounts receivable 54,900 43,300 Inventories 38,100 34,500 Other current assets 13,800 10,200 - - -------------------------------------------------------------------------------------------- Total current assets 115,600 93,200 - - ------------------------------------------------------------------------------------------- Net property, plant and equipment 186,100 172,800 Investments in affiliated companies 19,000 17,800 Intangibles and other assets 31,000 23,600 - - -------------------------------------------------------------------------------------------- Total Assets $ 351,700 $ 307,400 - - -------------------------------------------------------------------------------------------- LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Current portion of long-term debt $ 11,500 $ 5,400 Notes payable 9,400 2,300 Accounts payable 15,200 14,100 Other current liabilities 32,100 25,000 - - -------------------------------------------------------------------------------------------- Total current liabilities $ 68,200 $ 46,800 - - -------------------------------------------------------------------------------------------- Long-term debt, excluding current portion 26,000 24,600 Deferred income taxes 20,200 18,400 Other long-term liabilities 19,800 18,600 Minority interests 13,700 10,900 Shareholders' equity 203,800 188,100 - - -------------------------------------------------------------------------------------------- Total Liabilities and Shareholders' Equity $ 351,700 $ 307,400 - - -------------------------------------------------------------------------------------------- Shareholders' equity per share $ 12.72 $ 11.82 - - -------------------------------------------------------------------------------------------- See accompanying notes to financial statements.
The West Company Incorporated and Subsidiaries CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands)
Six Months Ended June 30, 1994 July 4, 1993 Cash flows from operating activities: Net income, plus net non-cash items $ 26,700 $ 26,300 Changes in assets and liabilities (9,500) (11,200) - - ----------------------------------------------------------------------------------------- Net cash provided by operating activities 17,200 15,100 - - ----------------------------------------------------------------------------------------- Cash flows from investing activities: Property, plant and equipment acquired (11,000) (19,000) Proceeds from sale of assets 800 6,200 Payments for acquisitions, net of cash acquired (4,500) - - - ----------------------------------------------------------------------------------------- Net cash used in investing activities (14,700) (12,800) - - ----------------------------------------------------------------------------------------- Cash flows from financing activities: New long-term debt - 2,200 Repayment of long-term debt (900) (600) Notes payable, net 3,800 (2,900) Dividend payments (3,500) (3,200) Sale of common stock, net 1,500 1,700 - - ----------------------------------------------------------------------------------------- Net cash provided by (used in) financing activities 900 (2,800) - - ----------------------------------------------------------------------------------------- Effect of exchange rates on cash 200 0 - - ----------------------------------------------------------------------------------------- Net increase (decrease) in cash, including equivalents $ 3,600 $ (500) - - ----------------------------------------------------------------------------------------- See accompanying notes to financial statements.
The West Company, Incorporated and Subsidiaries Notes to Interim Financial Statements The interim consolidated financial statements for the three and six month periods ended June 30, 1994 are based on the Company's accounts without audit and should be read in conjunction with the consolidated financial statements and notes thereto of The West Company, Incorporated appearing in the Company's 1993 Annual Report on Form 10-K. 1. Interim Period Accounting Policy -------------------------------- In the opinion of management, the unaudited Condensed Consolidated Balance Sheet as of June 30, 1994 and the related unaudited Consolidated Statement of Income for the three and six months periods then ended and the unaudited Condensed Consolidated Statement of Cash Flows for the six month period then ended and for the comparative periods in 1993 contain all adjustments, consisting only of normal recurring accruals, necessary to present fairly the financial position as of June 30, 1994 and the results of operations and cash flows for the respective periods. The results of operations for any interim period are not necessarily indicative of results for the full year. In the fourth quarter of 1993, the Company standardized its reporting year end to December 31 thereby eliminating the one month lag for all international operations. Consequently the first six months of 1994, include the first six calendar months for all operations, but 1993 comparative information reflects the six months from December 1992 through May 1993 for all international subsidiaries. Operating Expenses ------------------- Certain operating expenses have been annualized for interim reporting purposes. Income Taxes ------------- The tax rate used for interim periods is the estimated annual effective consolidated tax rate, based on current estimates of full year results, except that taxes applicable to operating results in Brazil are recorded on a basis discrete to the period and prior year adjustments, if any, are recorded as identified. The West Company, Incorporated and Subsidiaries Notes to Interim Financial Statements (Continued) 2. Inventories at June 30, 1994 and December 31, 1993 are summarized as follows: Audited (in thousands) 1994 1993 -------- -------- Finished goods $ 17,100 $ 14,100 Work in process 5,400 4,700 Raw materials and supplies 15,600 15,700 ------ ------ $ 38,100 $ 34,500 ------ ------ ------ ------ 3. The carrying value of property, plant and equipment is determined as follows: Audited (in thousands) 1994 1993 ------ -------- Property, plant and equipment $ 351,300 $ 322,800 Less accumulated depreciation 165,200 150,000 ------- ------- Net property, plant and equipment $ 186,100 $ 172,800 ------- ------- ------- ------- 4. Common stock issued at June 30, 1994 was 16,844,735 shares, of which 828,745 shares were held in treasury. Dividends of $.11 per common share were paid in each quarter of 1994. 5. The Company has accrued the estimated cost of environmental compliance expenses related to current and former manufacturing facilities. The ultimate cost to be incurred by the Company cannot be fully determined; however, based on information currently available, the Company believes the accrued liability is sufficient to cover the future costs of required remedial actions. Management's Discussion and Analysis of Financial - - ------------------------------------------------- Condition and Results of Operations. - - ------------------------------------ Results of Operations for the Three and Six Months Ended - - --------------------------------------------------------- June 30, 1994 Versus the Comparable 1993 Periods. - - ------------------------------------------------- Net Sales - - --------- Net sales for the quarter were $4.4 million higher in 1994 versus the same period in 1993. Increased demand for products in U.S. consumer products markets and higher sales in Europe due in large part to the acquisition of a 51% interest in Schubert Seals A/S were the primary reasons for the improvement. These increases were offset in part by lower sales in Brazil because of reduced government demand there. For the six months, net sales were $4.6 million higher compared to the same period in 1993. The standardization of reporting periods in the fourth quarter of 1993 increased reported sales comparisons by $2.8 million. In addition, sales to U.S. consumer products markets and machinery sales increased. Offsetting these increases were the absence of Tri/West Systems, Inc. sales (sold in the third quarter of 1993) and unfavorable exchange rate variances due to a stronger U.S. dollar. Gross Profit - - ------------ Gross profit for the second quarter of 1994 increased 11% compared to the same quarter in 1993. Margins improved significantly to 32.6% from 30.8% because of operating efficiencies and increased sales activity. Especially notable is the improvement in margins on consumer products sales in the U.S., which doubled. For the six month period, gross profit was 15% higher in 1994 versus the same period in 1993. Again, as it was for the quarter, improved operating efficiencies in the U.S. contributed to the improvement. Also, the standardization of reporting periods for international operations accounted for $2.0 million of the increase in gross profit comparisons. Selling, general and administrative (SG&A) expenses increased by $1.1 million, or 7%, in the second quarter of 1994 versus the same quarter in 1993. For the six months, SG&A expenses are up $1.7 million, or 6%, in 1994 compared to 1993. Expenses for outside services, rental and other expenses related to the new headquarters facility and contributions increased 1994 spending. Reporting period standardization also contributed to the unfavorable variance. Part of these expenses were offset by cost savings because of staff reductions over the last three years and favorable exchange rate variances. Other expense for the quarter increased to $0.5 million from $0.3 million in 1993. For the first six months of 1994, other expense increased to $1.2 million from $0.7 million of other income in the comparable 1993 period. Continued high inflation in Brazil increased translation losses while interest income was lower. Also, other income for the six months 1993 included a gain from the sale of the Company's former headquarters and research center facilities. Interest Expense and Minority Interests - - --------------------------------------- Interest expense for the second quarter of 1994 was unchanged from the same period in 1993 and interest expense was lower by $0.1 million for the six months 1994 compared to 1993. Lower average debt levels and a stronger U.S. dollar in Europe were the major causes. Minority interests reflect higher earnings by the Company's majority-owned subsidiaries in Europe including 49% minority holding in Schubert Seals A/S, in which the Company acquired a 51% interest in May, 1994. Taxes - - ----- The tax rate for the quarter was 35.4%. This reflects the reduction of the current estimate of the 1994 effective tax rate to 37.25% because of lower state tax liabilities. The effective tax rate at the end of the first six months 1993 was 39%, but was 38% at the end of 1993, due to the favorable settlement of an audit issue in the fourth quarter 1993. Net Income - - ---------- Net income for the second quarter of 1994 was $7.5 million, or $.47 per share, compared to net income for the second quarter of 1993 of $6.2 million, or $.39 per share. Net income for six months ended June 30, 1994 was $14.5 million, or $.91 per share, compared to net income of $11.8 million, or $.75 per share, (before the cumulative adjustment of deferred taxes to adopt Financial Accounting Standards No. 109 (SFAS 109), Accounting for Income Taxes) in the comparable period of 1993. The Company's adoption of SFAS 109 added $1 million, or $.06 per share, to the 1993 six months earnings. Financial Position - - ------------------ Working capital at June 30, 1994 was $47.4 million compared to $46.4 million at December 31, 1993. The working capital ratio at June 30, 1994 was 1.69 to 1. Cash on hand and cash flows from operations were adequate to fund the acquisition payments for Schubert Seals A/S and Senetics, and capital expenditures, and to repay long-term debt and pay dividends equal to $.22 per share. Management believes the Company's current capitalization will provide sufficient cash to meet requirements in the near future. Total debt as a percentage of total invested capital was 17.4% at the end of June 30, 1994, compared to 14.0% at the end of December 31, 1993. Part II - Other Information ------------------- Item 1. Legal Proceedings A. Wayne, New Jersey The Company is a party to an Administrative Consent Order with the New Jersey Department of Environmental Protection (DEP) under which the Company is required to submit and perform a cleanup plan for property formerly owned by the Company in Wayne, New Jersey. The DEP has approved the Company's plan which permits a plastic waste-disposal area to be capped and to remain in place, subject to placing a use restriction on that portion of the property, and subject to the DEP's further determination of the extent to which groundwater monitoring will be required. The present owner of the property has thus far declined to provide the use restriction and the Company has initiated legal action against him to compel him to provide the use restriction. The DEP has not yet taken final action with respect to any further remedial steps such as ground water monitoring which may be required as part of the cleanup plan. B. Vega Alta, Puerto Rico Since 1987 the Company, along with several other major companies, has been considered by the Environmental Protection Agency to be potentially responsible for costs of an environmental clean-up of ground water contamination in an area which includes the site of one of the Company's existing plant locations in Puerto Rico. In this connection, EPA has issued two orders for corrective action work to clean up the ground water and the Company has been named a defendant in a cost recovery action brought by the United States in the United States District Court for the District of Puerto Rico against the Company and other potentially responsible parties. As a result of these orders, the Company and two other potentially responsible parties have been engaged in the design and construction of a ground water recovery and treatment well (the Ponderosa Well) as the first part of an overall remedy at the site. Effective June 30, 1993, the Company entered into an agreement with General Electric Company, UNISYS Corporation, Motorola Corporation and Harman Automotive, Inc. under which the Company has paid General Electric Company $800,000 and General Electric and UNISYS Corporation have agreed to indemnify the Company against all future government claims relating to the contamination of the ground water by volatile organic compounds. As a part of this agreement, the Company has also obtained releases of cost recovery claims from all of the other parties to the agreement. Under the terms of this agreement, the Company will continue to be responsible for any required clean up of the soils at its facilities in Puerto Rico and for any future toxic tort or natural resource damage claims which may arise from the contamination of the ground water. The indemnity includes protection against any possible claim by the Puerto Rico Aqueduct and Sewer Authority, which once indicated that it might assert a claim against the potentially responsible parties for the cost of its development of other wellfields to replace the water formerly supplied by the contaminated aquifer. Pursuant to the terms of this Agreement, the Company has stipulated with the United States that it is a liable party. As a result of this agreement, the Company will avoid the costs of participation in the existing litigation and any further contribution to the cost of remedying the contaminated ground water at this site. See note number 5 of Notes to Interim Financial Statements beginning on page 6 of this report. Item 4. Submission of Matters to a Vote of Security Holders -------------------------------------------------- (a) The Company held its annual meeting of shareholders on May 3, 1994. (c) The following nominees were elected Class I directors (with a term expiring in 1997) by the following vote: BROKER FOR WITHHELD NON-VOTES ABSTENTIONS ----- -------- -------- ------------ W. J. Avery 12,363,058 104,000 0 N/A G. J. Hauptfuhrer, Jr. 12,363,058 104,400 0 N/A W. G. Little 12,362,858 104,600 0 N/A M. E. Trout 12,363,058 104,400 0 N/A The appointment of Coopers & Lybrand as the Company's independent accounts for the year ending December 31, 1994 was approved by the following vote: FOR WITHHELD BROKER NON-VOTES ABSTENTIONS --- -------- ----------------- ------------ 12,376,747 79,399 6,126 5,183 Item 6. Exhibits and Reports on Form 8-K -------------------------------- (a) None (b) No reports on Form 8-K have been filed for the three months ended June 30, 1994. SIGNATURES ---------- Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. THE WEST COMPANY, INCORPORATED ---------------------------- (Registrant) August 11, 1994 /s/ R. J. Land - - --------------------------------- ------------------------------- (Date) (Signature) R. J. Land Sr. Vice President, Finance and Chief Financial Officer August 11, 1994 /s/ A. M. Papso - - --------------------------------- -------------------------------- (Date) (Signature) A. M. Papso Vice President and Corporate Controller (Chief Accounting Officer) -----END PRIVACY-ENHANCED MESSAGE-----